The euphoria surrounding the end of 2008 appeared to evaporate on Monday as the markets sank back into the red, ending a streak of three consecutive triple-digit rallies.
Today’s Market
The Dow Jones Industrial Average lost 81.80 points, or 0.91%, to 8952.89, the S&P 500 fell 4.35 points, or 0.47%, to 927.45 and the Nasdaq Composite slid 4.18 points, or 0.26%, to 1628.03. The consumer-friendly FOX 50 dropped 6.68 points, or 0.94%, to 704.77.
"I think it’s a relatively constructive day. We have the first major trading day of the new year and we've had a pretty nice rally off the bottom yet we aren’t giving back too much," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. Sparks added that 100 points "is a relatively light contraction," especially given the Dow's 550-point surge over the prior three days.
WallStreet failed to rally around a series of seemingly positive headlines, including a better-than-expected construction spending report and new details emerging about robust tax cuts in the Obama economic stimulus package.
“The fact that we did have a few bits of positive news wasn’t enough to overcome the need for the market to take a breather here," said Sparks.
Monday's losses cut into Friday's 258-point jump on the Dow as the index ended above the 9000 level for the first time since early November in its sixth strongest start to a new year on record.
“I think we’re getting a little bit of profit taking after Friday’s rise,” said Paul Nolte, director of investments at Hinsdale Associates. “I don’t know if people are willing to commit huge dollar numbers ahead of the employment report on Friday.”
Telecom giants Verizon (VZ) and AT&T (T) were two of the biggest percentage losers on the benchmark index on Monday, canceling out big gains for Home Depot (HD) and American Express (AXP).
The Nasdaq Composite saw more modest selling than the broader markets, ending down just 0.26%. Virgin Media (VMED) and Activision Blizzard (ATVI) led the way down on the Nasdaq 100, countering gains from BlackBerry maker Research in Motion (RIMM) and SanDisk. Also,Apple’s (AAPL) shares rose sharply after the tech giant said Steve Jobs will remain as CEO while he recovers from a “hormone imbalance” that has caused weight loss.
The markets received a fleeting boost after the Commerce Department released a new report showing construction spending slid by 0.6% in October, a narrower-than-expected decline. Shares of homebuilders like KB Home (KBH) and Hovnanian (HOV) thanks to the surprise report.
Meanwhile, The Wall Street Journal and other media outlets reported President-elect Barack Obama and congressional Democrats are crafting an economic stimulus package that includes $300 billion in tax cuts to individuals and businesses in an effort to gain wide support for the legislation and encourage job creation. The size of the tax cuts are greater than lawmakers had expected and could be more powerful than either of President Bush's tax cuts, the Journal reported.
At the same time, several lawmakers signaled over the weekend it is unlikely the vast stimulus legislation will be ready to be signed by Obama immediately after his inauguration.The tax-cut news did little to stimulate the markets on Monday.
“There’s an awful lot of hoops to go through before you get anything put on the books. And once it gets on the books it doesn’t mean we will see an immediate benefit,” said Nolte.
WallStreet mostly shrugged off the latest month of bloody car sales for the world's largest auto makers. Chrysler LLC took the brunt of the damage as the manufacturer said its U.S. sales plummeted 53% in December compared to a year ago. The figures weren't much better for Chrysler's rivals as Toyota (TM) said its U.S. sales plunged 37% last month, Ford (F) disclosed a 32% drop in sales and General Motors (GM) posted a 31% slide.
Crude Nears $50
Energy stocks were the biggest winners on Monday, jumping more than 2% as a sector thanks to the third consecutive winning day for crude oil prices. Individual names like Schlumberger (SLB) and Valero (VLO) saw even heavier buying.
Building on last week's gains of more than 23%, crude oil posted its biggest one-day percentage gain since December 1. The price of a barrel of crude settled up $2.47, or 5%, to $48.81. The commodity was boosted by the implementation of previously announced production cuts from OPEC as well as continued tensions in the Middle East.
Corporate Movers
Apple’s (AAPL) Steve Jobs said his recent weight loss is due to a “hormone imbalance” and said he will remain as the tech giant’s CEO during his recovery.
Tyson Foods (TSN) said CEO Dick Bond is leaving the company, effective immediately. Former chairman and CEO Leland Tollett will take over in an interim basis at the world’s largest meat company.
AT&T (T) and Verizon (VZ) saw their shares sink after Bernstein Research downgraded its ratings on the telecoms giants. Citing the ongoing recession, Bernstein cut AT&T to “market perform” and Verizon to “underperform.”
Pfizer (PFE) is open to acquiring a large rival drug maker to grow revenues, the company’s chief executive told the Financial Times.
Mosaic (MOS), the fertilizer maker, is expected to say earnings soared by 73% to $1.43 per share in the prior quarter.
The New York Times Co.’s (NYT) namesake paper began selling display advertising on its front page on Monday, joining papers such as TheWall Street Journal and USA Today in running front-page ads amid a severe drop in ad revenue.
Navistar (NAV), the engine manufacturer, disclosed a weaker-than-expected 2009 earnings projection due to a “weak North American business climate.” However, shares of Navistar soared after the company said in a subsequent conference call it believes truck sales will rebound in 2010.
Walgreen (WAG) posted a 4.9% jump in same-store sales in December.
Global Markets
European markets ended modestly higher, led by a 0.67% gain for the Dow Jones Euro Stoxx 50 and a 0.39% rise for London's FTSE100.
Asian markets enjoyed large gains as Hong Kong’s Hang Seng jumped 3.46% and Japan’s Nikkei 225 rose 2.07%.
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